EHT and the Queen Mary have similar futures as vehicles
Hopes for reviving a troubled Singapore hotel REIT have dropped to their lowest setting as security holders in Eagle Hospitality Trust today rejected two of three board resolutions at its annual general meeting, including a motion to raise capital for the cash-strapped vehicle.
Today’s meeting was held just three days after Gabriel Stubbe, a veteran hotel investment executive who served as an independent director of EHT, was removed from the board before he could chair the AGM.
The trust, which consists of a stapled group of Eagle Hospitality Real Estate Investment Trust (EH-Reit) and Eagle Hospitality Business Trust (EH-BT), holds a portfolio of 18 US hospitality assets including the docked luxury liner Queen Mary in Long Beach, California.
EHT, which reported a loss of $38.9 million for the second quarter, has been mired in legal disputes for months with Singapore’s central bank having been investigating the trust’s manager and sponsors since at least June for suspected breaches of disclosure rules.
That investigation was launched the same month that the California cities of Pasadena and Long Beach each took separate legal actions against companies holding properties in EHT’s portfolio, with creditors also placing liens against the REIT’s assets. Since that time, authories in Denver and other cities where the trust’s assets are located have taken action against the master lessees holdings its properties.
Independent Director Booted by Sponsor
In a statement to the Singapore exchange on Sunday, EHT’s manager indicated that Stubbe, who also serves as a senior vice president at JLL’s hotels and hospitality division, had offered to be re-elected as director of the trust’s manager.
Gabriel Stubbe ceased to be a director on Friday
On the trust managers’ board Stubbe also served as chairman of the nominating and remuneration committee and chaired a special committee set up on 1 April of this year to lead the firm’s outreach to lenders as well as conduct a strategic review set up after it was declared in default on a $341 million syndicated loan.
Stubbe had been approved by the boards of the trust’s managers, as well as by the REIT’s trustee from DBS, for nomination as chairman of the annual general meeting held today. However, on Friday the hotel investment veteran was notified by a company controlled by the owners of Urban Commons, the trust’s sponsor, that he would not be re-elected to the board.
In the statement by the trust’s managers to the Singapore exchange Stubbe was said to lament the decision by the controllers of the REIT’s sponsor, which he feels strongly is to the detriment of its security holders.
EHT independent director Ng Kheng Choo had resigned from the board in mid-March of this year, just two weeks after the trust manager’s CFO Fred Chee Kin Yuen stepped down for what were said to be personal reasons. Both directors left the trust less than one year after its May 2019 IPO.
Auditors Withhold Chop
Stubbe, who had served as director of EHT since April 2019, was removed from the board just two weeks after KPMG, which serves as the REIT’s auditors, declined to certify its books for 2019 or the ensuing period.
In their 14 August report KPMG indicated that, given a range of issues, such as the unclear nature of liabilities including an unsecured $89 million loan to the trust, “we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.”
On the same day that KMPG’s report was released Eagle Hospitality Trust’s manager and trustee said they had been told by their advisors that one of the trust’s master lessors had applied for and received a loan of more than $2 million via an application signed by Urban Commons director Taylor Woods on 18 May. By that date Woods had already been removed as an officer of the master lessor.
Based on a laundry list of other tax and legal complaints against affiliates of the trust in locations across the US, KPMG’s team said that, “we do not express an opinion on the accompanying financial statements of EH-BT and consolidated financial statements of EH-REIT Group and EHT.”
At today’s AGM, nearly 58 percent of security holders voted to reappoint KPMG as the REIT’s auditors.
The other two resolutions offer at the meeting fared less favourably with a move to adopt annual reports issued by the trust’s managers and trustees being rejected by nearly 58 percent of security holders and a motion to authorise the issue of new securities or to create convertible instruments to raise capital being rejected by over 80 percent of the trust’s owners.
Note: this story has been updated to show that EHT’s special committee was formed on 1 April. An earlier version indicated that the committee began its work in June. Mingtiandi regrets the error.
Interesting. What happens next?